Question

A company borrows $25 000 to buy new equipment. The loan is to be repaid in five equal annual payments. If the interest rate is10%, how much are each of the payments? " $3 238 $6 595 $5 500 $6 222

Answer 1

Answer:

Each payment is of $6595

Explanation:

Amount borrowed by company= $25000

No. of installments = 5

Interest rate = 10%

We are supposed to find how much are each of the payments

Formula : $Amount =I (\frac{1-\frac{1}{(1+r)^n}}{r})$

I = installment

r = rate of interest

n = No. of installments

So, $25000 =I (\frac{1-\frac{1}{(1+0.1)^5}}{0.1})\\\frac{25000}{(\frac{1-\frac{1}{(1+0.1)^5}}{0.1})}=I\\6594.93=I$

So, Each payment is of $6595